State Legislature: Oil, gas industry outraged by bill

Local governments would get regulation authority within their jurisdictions

By Marianne Goodland

Special to The Times

Posted:
03/10/2019 08:08:11 PM MDT

From the day of its introduction to its first hearing, Senate Bill 181 has generated howls of outrage from the oil and gas industry and less than full-throated support even from those you'd expect to favor it.

The measure, introduced on Feb. 28, got its first hearing March 5, in a 12-hour hearing that stretched into the wee hours of the morning March 6, finally wrapping at 2 a.m.

Hundreds of opponents and supporters descended on the state Capitol March 5 to battle over the bill, both inside the hearing and in rallies prior to its review by the Senate Transportation and Energy Committee. The committee approved the bill on a party-line 4-3 vote. It was heard by the Senate Finance Committee on Thursday, which also approved it on a party-line vote.

Senate Bill 181 modifies the mission of the Colorado Oil and Gas Conservation Commission. Current law requires the commission to "foster the responsible development of Colorado's oil and gas" industry in a manner consistent with the protection of public health, safety and welfare, and the environment and wildlife resources. But over time, the bill's sponsors claimed, the COGCC instead has imposed a balancing test between those two provisions, and opponents of the oil and gas industry have claimed that the COGCC is too industry-friendly.

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Under Senate Bill 181, the words "foster the responsible development" is gone, instead replaced with "regulate." That regulation must be done in a manner that protects public health, safety and welfare, the bill states, as did the bill's Senate sponsor, Senate Majority Leader Steve Fenberg of Boulder. The COGCC's composition also will change under the bill, adding two positions that would include a public health expert and an expert on the environment, and removing two industry proponents.

The bill's other provisions include allowing local governments to regulate the industry within their borders, something long sought by Boulder and Broomfield counties, as well as in lawsuits by other Front Range communities.

The bill also increases the number of mineral owners who must consent to "forced pooling," a practice that allows oil and gas companies to operate in a drilling area so long as it has the consent of mineral rights holders in that area. The drilling can commence even when the person who owns those mineral rights doesn't consent to the drilling. The bill changes the rules around forced pooling to require permission from those who hold at least 50 percent of the mineral rights interests in a forced pooling-targeted area.

Tuesday's hearing was relatively evenly divided between opponents and supporters of the bill, with about 200 testifying (with slightly more in favor). Hundreds more wore T-shirts that said "I AM COLORADO OIL AND GAS," filling the Capitol throughout the day, as a silent protest against the bill that they say will cost the state billions of dollars in lost economic activity and as many as 30,000 jobs. Some workers in the industry claimed they'd been given the day off to testify or attend the rally.

Both opponents and supporters - and even lawmakers on both sides - have pointed out that the 27-page bill was just introduced the Friday before and was heard in a committee hearing just a few days later. But Senate Majority Leader Steve Fenberg of Boulder, the Senate sponsor of the measure, told the committee that there's plenty of time for the debate in the coming weeks, with as many as six committee hearings and several debates likely in the House and Senate.

The bill does not allow a ban on oil and gas drilling, Fenberg told the committee. Any regulation adopted by a local government must be "rationally designed ... to protect health and safety." Any regulation that is overly burdensome could be viewed as not being rational and could be struck down under the bill, he said.

The measure does not increase setbacks between oil and gas drilling and occupied structures, a proposition rejected by voters last November. "This bill is the antithesis of 112," Fenberg said. It also does not set up a moratorium on oil and gas activity; there are currently, 6,500 permits pending before the COGCC. This does not apply to the vast majority of permits, only to ones that raise concerns for local governments, he said.

There are only a handful of cities that will use this land use authority, Fenberg said, addressing the concerns about the bill killing off oil and gas jobs. Boulder will probably use this authority, he said, but it's unlikely to have an impact in other counties that are friendly to oil and gas extraction. That would likely include Weld County, which has the most oil and gas activity in the state.

The accusation that the oil and gas industry was excluded in the bill process is false, Fenberg said, citing several oil and gas groups as well as environmental groups that were consulted during the drafting process. None of these entities wrote the bill, but "I collected their feedback and did a lot of listening," he told the committee. "A stakeholder process does not mean everyone gets their way."

Among the witnesses testifying during the March 5 hearing: Erin Martinez of Firestone. Her husband and brother were killed in a home explosion in 2017 that was caused by methane leaking into a basement drain from an abandoned and uncapped gas line owned by Anadarko Petroleum. "My story begins when my husband and I came into the house to find the floors rattling" in April 2017, Martinez said. Their hot water heater was shaking and leaking water. They turned off the water heater and gas, and concluded the hot water heater wasn't working and decided to replace it. After that happened, and for a day and a half, it worked fine. But on Easter Sunday, they came home to the same problem. The next day, her husband and brother started working on the problem again, and as she was leaving the house and opened a sliding glass door, "I was blown in the air," and the entire house came off its foundation. The entire upper floor of the house was on top of her.

Nearby construction workers rescued her and her son from the house, but her husband and brother were dead. That's not where the story ended, she said. Martinez said she later searched for a new home that was far from any oil and gas activity and thought she'd found one after diligently researching the property.

But after living there for six months, one day, she saw oil and gas people looking for an abandoned oil well in a nearby field. It wasn't there - it was in her backyard. She and her children are now looking for another new home.

What happened to her would not have happened had proper regulations and testing been in place, she said.

Others testified that noise from nearby oil and gas operations makes their homes unlivable, or that gas from drilling activity leaks into groundwater and wells.

"This bill makes sense because we are a diverse state, and what works well in one part of the state might not work well in another," said Dan Gibbs, executive director of the Department of Natural Resources, a former lawmaker and a three-time Summit County commissioner. The department oversees the Colorado Oil and Gas Conservation Commission.

Gary Kaufman, director of the Colorado Air Quality Control Division within the Department of Public Health and Environment, told the committee that minimizing emissions from the oil and gas sector is critical for Colorado to meet its air quality goals, both for reducing ozone levels and cutting greenhouse gas emissions. Denver is out of compliance with federal ozone levels, he said, pointing to oil and gas as the biggest contributor to those levels.

On the other side, Tracee Bentley of the Colorado Petroleum Council said the bill would, at the very least hinder, if not prohibit, energy development in Colorado, and that the Democratic Senate and House leadership "seems intent on pushing this misinformed bill forward, despite it being fraught with unintended consequences."

"Not only is this bad policy and a gross overreach by bill sponsors in every aspect, but the process by which this bill has been shoved through the legislature signals to Colorado that this leadership has little regard for those impacted by their bad policy," Bentley said. "We are still hopeful that the sponsors of the bill and Governor Polis' office will slow down this process and listen to as much stakeholder input as is needed, proven by the stakeholders who expressed strong concern with their lack of input on the bill" during Tuesday's hearing. "SB19-181 contains the most overreaching provisions of any energy proposal we have ever reviewed, and all but guarantees that industry will be forbidden from operating in certain jurisdictions."

Attorney Mark Mathews of the Colorado Oil and Gas Association said the bill grants local governments "complete and total authority over oil and gas operations." That would also include groundwater monitoring, sourcing and quality, he said. The bill also does not include the term "reasonable" with regard to regulations, or that local regulations must be technically feasible or cost effective.

Republican Sen. Ray Scott of Grand Junction told Fenberg during the hearing that the COGCC is already basically writing the bill through 19 recent new regulations for proposed wells, save for changing the law itself. The regulatory agency "already has the right to do whatever they want" with the industry, he said.

Weld County Commissioner Barbara Kirkmeyer testified in both the March 5 and March 7 hearings. On March 7, she told the finance committee that drilling in Weld County impacts the entire state. That includes school funding - 16 school districts in Weld County take in $200 million in property taxes - and the bill doesn't talk about how the state will backfill that school funding if the property taxes from oil and gas decrease.

The problem is that in the bill, if there is a conflict between a county agency regulation and a state agency regulation, the state agency's regulation will prevail, she said. And that could create a conflict between agricultural - she cited a farmer using a drip irrigation system near a well, for example - and the setbacks dictated by the state, she said. Local government grants and severance taxes also will be impacted, as will the Colorado Land Trust. "If you impact where drilling cannot occur or hold up permits for an indeterminate amount of time, there will be no new well production and no new revenues for those projects." That's about $150 million for the state land board, she said. In Weld County, 4,500 permits are now on hold while rulemaking is ongoing.

Any time there is sweeping regulations or statutory changes, the industry leaves, Kirkmeyer said. "We had 50 rigs in 2009. After regulations changed, it dropped to 15," she said. And that's a 20 percent decrease in assessed value, which impacts property taxes.

"This bill is moving like a freight train through this building," said Republican Sen. Rob Woodward of Loveland.

Senate Bill 181 was sent March 7 to the Senate Appropriations Committee for its next hearing.

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